Summary#
The bill would change rules for health savings accounts (HSAs). It would let people take tax-free distributions from HSAs during a period of "qualified caregiving" and it would remove the rule that you must have a high-deductible health plan (HDHP) to be eligible for an HSA. It also sets a new statutory contribution limit of $9,000 for an individual HSA (and $18,000 for a joint return).
- Main change: HSA withdrawals made “during a period of qualified caregiving” would not count as taxable income.
- Main change: The law would no longer require that HSA holders be covered by a high-deductible health plan.
- Main change: The bill raises the HSA contribution limit to $9,000 for individuals (twice that for joint returns).
- Definition note: The bill defines a “period of qualified caregiving” by reference to specific subparts of the Family and Medical Leave Act (FMLA), rather than listing the situations in the bill itself.
- Timing: These changes apply to taxable years beginning after the bill becomes law; the contribution-limit change applies to months in taxable years beginning after enactment.
What it means for you#
- HSA account holders: You could withdraw money from your HSA during a period of “qualified caregiving” without including that withdrawal in taxable income. The bill’s text does not require that the withdrawn money be spent on medical care to be tax-free during that period.
- People on family or medical leave: If your leave fits the FMLA situations referenced in the bill, HSA withdrawals while on that leave could be tax-free. The bill ties “qualified caregiving” to specific FMLA subparagraphs but does not restate what those subparagraphs cover.
- People without a high-deductible health plan: You would be able to open and contribute to an HSA even if you do not have an HDHP, if the bill becomes law.
- Families and joint filers: The law would set the contribution cap at $9,000 per individual and $18,000 on a joint return.
- Employers and payroll/benefits administrators: Plan rules and payroll systems would need updating because eligibility rules for HSAs would change and higher contribution limits would apply.
- Taxpayers generally: Expanding who can use HSAs and allowing broader tax-free withdrawals could change federal tax receipts (see Expenses).
Expenses#
No publicly available information.
- The bill text does not include a fiscal note or cost estimate.
- Possible fiscal effect (inference): Removing the HDHP requirement and raising contribution limits could let more people claim tax-preferred HSA contributions and withdrawals. This could reduce federal income tax receipts, but the bill text does not quantify any revenue loss.
- Possible administrative costs (inference): Employers, financial institutions, and the IRS may face costs to update systems, guidance, and forms to reflect new eligibility rules and contribution limits. The bill does not describe administrative or enforcement funding.
Proponents' View#
The bill text does not include sponsor statements, but the changes appear intended to achieve the following:
- The bill appears intended to help families access HSA funds while they are on family or medical leave by making withdrawals during that time tax-free.
- Supporters may argue this would give people more financial flexibility during caregiving or medical leave.
- Removing the HDHP requirement appears intended to let more people open and use HSAs, potentially increasing use of tax-advantaged savings for health care.
- Raising the contribution limit appears intended to increase the amount people can save in HSAs.
Opponents' View#
The bill text itself does not include critiques, but it raises several practical concerns or gaps:
- One concern is that the bill does not list what counts as a “period of qualified caregiving”; it only points to specific FMLA subparts. That makes the rule harder to read without consulting FMLA text and could create uncertainty about eligible situations.
- One concern is that the bill makes withdrawals during caregiving tax-free without saying they must be used for medical expenses. This could allow tax-free use of HSA funds for non-medical spending during leave, depending on how the IRS interprets the change.
- One concern is potential revenue loss: expanding eligibility and increasing contribution caps could reduce federal tax receipts; the bill gives no revenue estimate or offset.
- One concern is administrative complexity: employers, HSA custodians, and the IRS would need to change rules and systems; the bill does not specify implementation details, reporting requirements, or recordkeeping standards.
- It is unclear whether and how the change interacts with other tax rules and penalties that currently apply to non-medical HSA withdrawals; the bill does not explain these interactions.